|SCM Capital Research| Nigeria| Markets

Daily Market Recap 12th June, 2018

Equities Market
Market Data Today’s Close
Equities extend gains...ASI adds another 0.8% NSE All Share Index 39,167.39

Driven by continuous bargain-hunting, especially in the bellwether counters, the Market Cap. (N'bn) 14,188.3

Nigerian equities market added another 0.8% today to settle at 39,167.39 points Market Cap. ($'bn) 46.3

while YTD return strengthened to 2.4%. Consequently, investors gained N116.6bn Total Value Traded (N'bn) 5.2

as market capitalization increased to N14.2tn. Although volume traded declined Total Value Traded ($'mn) 17.0

by 43.4% to 341.5m units, value traded rose 33.6% to N5.2bn. Sector performance Total Volume Traded (Mn Units) 341.5
was largely bullish as all indices, with the exception of the Banking index which Total Number of Trades 3,769
shed 4bps due to profit taking in ACCESS (-1.8%), ZENITH (-0.4%) and GUARANTY (- Market Breadth (A-D Ratio) 1.3x
0.2%), closed positive. Tomorrow, we expect sentiment to remain upbeat on ac-
Close Price
count of continuous bargain-hunting. Top 5 Gainers % Change
(N)
SEPLAT 769.00 8.1%
Money Market
MOBIL 183.00 5.0%
System liquidity remained relatively stringent today as the money market rates NEM 2.62 4.8%
rose further. Specifically, Open Buy-Back (OBB) and Overnight rates rose by EQUITYASUR 0.22 4.8%
333bps and 392bps to settle at 15.17% and 16.50% respectively. We expect system UNITYBNK 0.92 4.5%
liquidity to remain relatively tight tomorrow as investors provide fund for the up-
coming PMA. However, we anticipate some easing towards the end of the week. Close Price
Top 5 Losers % Change
(N)
Treasury Bills PRESTIGE 0.61 -4.7%

The T-bills market was mostly active today with strong bargain-hunting in the short ETERNA 5.97 -4.5%

and mid dated papers. Investors took positions in 91(-1.19%) and 182(-0.34%) bills FCMB 2.30 -4.2%

as they would be offered in the Primary Market Auction (PMA) slated for tomor- NIGERINS 0.25 -3.8%
row. Overall, average T-bills yield moderated by 35bps to settle at 12.85%. At the AGLEVENT 0.51 -3.8%
upcoming PMA CBN has a total of N182.858bn (N6.217B – 91 days, N50.00B – 182
RSI of NSE All-Share Index
days & N124.640B – 364 days) on offer, expect stop rates to hover around their last 100
90
levels. We expect a mixed sentiment in the T-Bills market tomorrow albeit with a 80
70
bearish bias on the back of concentration of activities in the primary market. 60
50
Bond Market 40
30

In line with the upbeat in the T-bills market, the bond market was mostly bullish 20
10
today as bargain-hunting in 5y(-0.06%) and 7y(-0.13%) bonds more than offset 0
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profit-booking at the shorter and extreme end of the curve. The current sentiment
will most likely persist tomorrow as investor’s appetite for longer dated instruments
remains strong. T-Bills Current(%) % Change

3m 11.21 -1.19
6m 12.92 -0.34
FX Market
12 m 14.43 +0.47
Naira traded flat to close the day at N305.90/$ at the interbank foreign exchange
Bond Current(%) % Change
market. At the I &E window, daily volume of $269.44mn was traded as the domes-
3- year 13.53 +0.02
tic currency depreciated by 12bp to settle at N361.30/$. It however traded flat at
5-year 13.31 -0.06
the parallel market, closing at N361.0/$. Outlook for naira remains stable at the 7-year 13.35 -0.13
current FX reserve and oil prices.
10-year 13.64 +0.03
 |SCM Capital Research| Nigeria| Markets

Domestic Macro Wrap Current % Change

FX
Rising U.S. inflation and Naira Assets… NIFEX NGN342.71/$ +0.01
NAFEX NGN361.12/$ -0.12
Today, Bureau of Labour Statistics released the inflation report for the month CBN Interbank Official NGN305.90/$ 0.00
of May. The report shows that the U.S. headline inflation accelerated to I&E Window NGN361.30/$ +0.12
2.8% from 2.5% in April, faster than market expectation of 2.7%. Historically, Parallel Market NGN361.0/$ 0.00
this marks the highest level since February 2012 and it was majorly buoyed
Crude Oil Current % Change
by rising prices for gasoline and shelter as they recorded y/y price increases
Brent Crude $76.57 +0.13
of 25.3% and 21.8% from 22.6% and 13.4% in April respectively. However,
Food inflation sub-index eased from 1.4% in April to 1.2% in May. The Core
U.S. Headline Inflation
inflation which excludes food and energy inched higher to 2.2% from 2.1%
3.00% 2.80%
in the previous month.
2.50%
The first quarter of 2018 has witnessed a divergent interest rate path. Fed
increased rates from the range of 1.25%-1.50% to higher range of 1.50%- 2.00%

1.75% and pencilled in another three rate hikes before the end of the year 1.50%
amid accentuating inflation rates and growing economy. In response to
1.00%
Fed rate hike, Peoples Bank of China (PBoC) also hiked its benchmark inter-
est rate by 5bps to 4.35% in its last policy meeting while ECB and BoJ remain 0.50%
largely accommodative.
0.00%
Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18
In its ongoing two-day policy meeting, the consensus expectation is that
the Fed will increase rates, on guard for inflation as the core sub-index re- U.S. Core Inflation
mains above the policy bound of 2%. We then ask whether the Fed will take
a more aggressive approach by increasing rates more than three times that 2.20%

is already on the table? The answer is likely to be found in inflation readings

over the summer. If inflation tapers off around the Fed’s 2% target, the cen- 2.10%
tral bank is likely to stay the course. Yet if prices keep rising and the econo-
my remains strong, the Fed could lift rates at least twice more this year, re-
2.00%
sulting to four rate hikes this year.

On the domestic scene, what is the implications of the rising U.S. inflation for
Naira assets? The Nigerian capital market experienced some capital flow
reversal in the past few weeks on the back of rising U.S. bond yields. The Policy Bound Apr-18 May-18
rising inflation calls for further rate hike by FOMC and repricing of U.S. debt Source: US Bureau of Labour Statistics, SCM Capital Research
instruments, especially to the upside. This will most likely exacerbate the
heightened volatility in Naira assets. In our view, a more hawkish stance Head of Research
assumed by FOMC, coupled with the instability that comes with election- Sewa Wusu
eering tends to stoke further reversal in the Naira assets.
sewa.wusu@scmcapitalng.com

Analysts

Sunmbo Adekunle

Sunmbo.adekunle@scmcapitalng.com

Kolawole Akerele

kolawole.akerele@scmcapitalng.com

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